Brazil’s accelerating economy drives demand for automotive lubricants

From 2004 to 2012, Brazil’s consumption of finished lubricants grew by 33% to reach 1.23 million metric tons (metric MMt) of products in 2012, according to the new IHS chemical special market research report. The total 2012 global market for lubricants was approximately 39 metric MMt.

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An accelerating economy has doubled the passenger car fleet
in Brazil to about 30 million vehicles since 2000. The new car
fleet has also driven significant demand increases for
lubricants in this country. These trends have combined to
propel Brazil to the sixth-largest lubricants market globally,
after China, the US, India, Japan and Russia, but ahead
of Germany.

From 2004 to
2012, Brazils consumption of finished lubricants grew by
33% to reach 1.23 million metric tons (metric MMt) of products
in 2012, according to the new IHS chemical special market
research report. The total 2012 global market for lubricants
was approximately 39 metric MMt.

According to
IHS, nearly 70% of all lubricants used in Brazil are for
automotive applications such as motor oils; diesel, gasoline
and flex fuels; greases; powertrain fluids for transmissions
and axles; and motorcycle fluids. Other uses include industrial
lubricants for process, marine and specialty applications
(aerospace, electronics, fine mechanics, vacuum technologies
and high-temperature). Globally, automotive applications
account for 56% of lubricants used.

Brazils
increase in demand for lubricants is a direct reflection of its
economic growth, said Dr. Stefan Mueller, author of the
study and a specialty chemical analyst at IHS. The
countrys GDP tripled during 2004 to 2011, and, with that
impressive growth, the disposable income of the population grew
rapidly, allowing many families to buy their first car. This
rise in economic activity propelled the lubricants market to
new heights in Brazil, since automotive applications constitute
a majority of lubricant uses in the country.

Likewise,
there is ample room for growth in automotive demand in Brazil,
which will continue to expand the need for lubricants.
The Brazilian automotive market continues to be driven by
formal employment creation, improved financing rates that are
at an all-time low, and a low unemployment rate, said
Guido Vildozo, Brazilian automotive analyst for IHS Automotive.
This powerful combination, which enables consumers
access to credit, will continue to drive Brazilian automotive
demand for years to come.

Brazil also
has a low motorization rate of five people per car, thus
allowing ample market growth. IHS expects the Brazilian auto
market to be close to 5 million units before the end of this
decade. Forecast that the motorization rate will approach 3.3
people per car during the next 10 years. Brazil has become such
a critical pillar of growth for original equipment
manufacturers worldwide, and the same can be said for producers
of lubricants that supply the automotive sector.

While the
Brazilian lubricant industry has changed significantly for the
better quality and quantity of its products, the industry still
faces some significant technological and regulatory challenges
that it must addressed, says Mueller. From a quality
perspective, the lubricants market will change greatly before
2020. New regulations are coming that demand less air pollution
as well a decrease in fuel consumption for motor vehicles.
These goals can be achieved only by introducing products based
on higher-quality base oils, and new additive chemistry that
has already been developed in North America and Europe.

The
challenge, Mueller added, will be for Brazilian market
participants to decide whether to upgrade technology and invest in the
required production plants or to import those products over
time. With the trade balance for chemicals in an increasing
deficit, he expects the government will likely offer incentives
to install the required plants and to encourage refiners to
increase collection and re-refinement of used oils to help
decrease the requirement for base oil imports.

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